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What business costs are deductible?
Are you self-employed, and have you incurred business costs? These business costs are deductible from your revenue! As a result, your profits and the tax to be paid will be reduced. We are happy to help you. Leave your details in our online contact form or call us at +31 (0)20 – 2170120 and we will get in touch to see how we can help you.
But what are business costs, and therefore deductible? You can decide that for yourself. The Dutch tax authorities look at the motivation of the expenses. If this clearly shows that the costs are incurred because of your business, they are deductible. The Dutch tax authorities interfere as little as possible in this regard, but there are doubtful cases. Are your business costs very high compared to your revenue? Then, the Dutch tax authorities will check whether this is correct.
Partly deductible business costs
The general rule is that all business costs are tax-deductible. However, what happens when your expenses are partly business and partly private? Of course, you are not allowed to fully deduct the costs, but only the business part.
Take the following example: you use your phone for business and personal purposes. The annual subscription costs are € 600. However, the largest part (about 60%) is used for business purposes. In this case, the deductible business costs are € 360. Of course, you must be able to substantiate this!
Business costs or investments?
Let’s say: you bought a laptop for your business. Does this purchase belong to the deductible business costs? The answer is yes! However, this is a good example of the difference between business costs and investments. Did you buy the laptop for more than € 450? Then, this is seen as an investment. As a result, you are not allowed to fully deduct the item, but you have to spread this amongst the years the assets last (depreciation). The VAT you have paid on the laptop is seen as business costs
Are the costs deductible in one go?
Some costs are deductible in one go: but only the costs that relate to one year (e.g., rent & wages).
On the other hand, some costs can’t be deducted in one go and must be spread over several years. This is the case for the following cost items:
As we already mentioned, investments are longer lasting than regular business costs. For this reason, you may not deduct the costs in the year in which they were purchased. Instead, you have to depreciate the costs over the years the products last.
2. Other (prepaid) costs
Not only investments but also other costs that you incur can last for several years. You must divide these costs over the number of years in which the incurred expenses are useful (according to your own expectations). You can think of prepaid rent (or other prepaid costs).
Can you deduct VAT?
When you incur costs for your own company, it is often the case that the supplier charges VAT. Thanks to the so-called deduction of input tax, you can reclaim this VAT in most situations. If this is the case, you may deduct the costs excluding VAT from your profit. On the other side, if you can’t deduct the VAT, you may use the costs including VAT.
We are happy to help!
Are you self-employed, did you incur business costs, and do you want to know whether they are fully deductible? Or could you use the help of a tax advisor? We are happy to help! Please, contact us using the information mentioned below.